Lancaster sees double-digit growth on China expansion

The repositioning of the Monegasque brand as a prestige skincare brand was at the center of Coty’s concerns. Lancaster has had particular success in China, where it was first launched on Hainan Island before rolling out to a wider market.

Momentum generated by Lancaster in Hainan and the broader Chinese market fueled its double-digit growth in its fiscal year 2022, Coty said.

“This chain is now fully benefiting from Lancaster’s repositioning from a suncare brand to a skincare brand, which first started in Hainan but is now expanding into mainland China at Sephora as part of a an exclusive partnership. And we saw that brand growing double digits in FY22, which overall also had a lot to do with travel retail performance,” ​Sue Y. Nabi, CEO of Coty, at the company’s fourth quarter (Q4) earnings call.

The growing popularity of the brand is also evident in retail rankings. Lancaster is now Sephora’s second most popular exclusive brand in China and the third niche skincare brand with major retailers in Hainan.

Skin care, underutilized

Nabi said Lancaster was the first time Coty operated a “full range of skin care”​ in China and skincare remains an area of ​​untapped potential for the company.

The company revealed that it will host an investor event in September that will focus exclusively on its skincare business, underscoring the importance of the category to its business strategy.

Additionally, skincare is a critical category in China, a market of extreme importance to Coty’s future growth.

“China is so small for Coty that everything we do, just doing the right things, is a potential benefit to the whole business there and therefore to the company,” Nabi said.

Like its competitors, Coty has been impacted by COVID-19 lockdowns and restrictions that have disrupted daily life in China. That weighed on the company’s performance in the Greater Asia-Pacific region, which rose just 2% to $141.1 million in the fourth quarter.

For the full year, Asia-Pacific reported net revenue of $658.3 million, a 14% growth from nearly all other Asian markets, including travel retail APAC, offsetting the China’s temporary weakness.

Since then, the company has seen a recovery in China. “What we are seeing now two months into the first quarter of FY23, at least for Coty, is that our peak sales are back to, I would say, levels that are not the same as the ones we had at the start of the ’22 calendar, but very, very strong double-digit level,” Nabi said.

Opportunities in makeup too

While skincare represents significant opportunity, the post-pandemic recovery of the color cosmetics category is driving growth in Coty’s prestige makeup business.

Coty’s prestige makeup sales increased over 70% in FY22. The category accounts for more than 40% of APAC travel retail sales. In addition, makeup also accounts for about half of Burberry brand sales in China.